Morning Bell: The Internet Taxes that Could Be Coming

If you’ve ever bought anything on the Internet, over the phone, or from a catalog, you might have noticed that when you buy from some stores, you don’t pay any state sales tax, but if you buy from other stores, you do. That’s because a Supreme Court decision protected out-of-state businesses from revenue-hungry states. But a new bill working its way through Congress would change all that, turning every online retailer into a sales tax collector. And that’s legislation Congress should reject.

Back in 1992, the Supreme Court ruled in Quill Corporation v. North Dakota that a state cannot force a retailer who doesn’t have any physical presence in that state to collect sales taxes from Internet, phone or catalog sales. So if you ordered a book online from BarnesandNoble.com and there’s a Barnes and Noble store right down the street from your house, you’d have to pay sales tax. But if you ordered that book online from a mom and pop bookstore with one location halfway across the country, they wouldn’t have to collect sales tax from you.

In the Quill case, North Dakota tried to force out-of-state retailers to collect sales taxes and remit them to North Dakota, even if they didn’t have a physical presence in the state. Quill Corporation, which sells office supplies and is based in Delaware, had offices and warehouses in Illinois, California and Georgia, but didn’t have any bricks, mortar, employees, or sales representatives in North Dakota. It did, however, have 3,000 customers there and $1 million in annual sales, so North Dakota wanted Quill to collect tax on those sales.

The Court decided that North Dakota’s law was not permissible because the Constitution’s Commerce Clause protects against a state’s unreasonable burden on interstate commerce, unless Congress otherwise writes a law changing the rules. Since that decision, consumers, businesses and the free market have been protected from laws like the one North Dakota tried to impose, but now Congress is considering a law (S. 1832) that would overturn the Court’s decision and allow states to flip the switch on Internet taxation.

In a new paper, David S. Addington, Heritage’s Vice President for Domestic and Economic Policy, explains why Congress should not change the rules on Internet and mail-order sales:

In the long run, the national economy as a whole benefits from allowing consumers to choose freely what they wish to buy, of whatever quality they wish, at whatever prices they choose to pay, and from whatever seller they wish, whether in the same state as the consumer or not.

Intervention by the federal government and the states in the consumers’ choices by enactment and implementation of S. 1832 would increase the revenues of states, but hobbling out-of-state businesses that sell through the Internet or mail order catalogs does not help the national economy.

Addington writes that it’s not surprising that states want a new source of revenue. After all, they’re struggling with their bloated budgets in this weak economy. But overriding the Quill decision would only give states an incentive to increase taxes instead of cutting the size, scope, and cost of government. And it would be consumers and businesses that pay the price.

There are business groups, too, who are lobbying for the law, arguing that it would protect “Main Street” retailers and “bricks and mortar” stores that are supposedly at a disadvantage. But, as Addington writes, “They seek enactment of S. 1832 so that states can prefer in-state businesses over out-of-state businesses in the kind of anti-competitive economic discrimination the U.S. Constitution was in part adopted to prevent.” What’s more, every sale of goods involves at least one physical facility located in one state or another, which means that those businesses already can be taxed by at least one state. In short, no one is “untaxable.”

At a time when the U.S. economy is struggling to get back on its feet, Congress should not enact a law that interferes with the independent decisions of millions of consumers in the free marketplace and overturns the settled expectations of businesses that have made market decisions under the current rules for two decades. And it shouldn’t give state governments a reason to take more money from taxpayers instead of getting their spending under control.

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I sell on EBAY. I turn around and put any money I make back into the enconomy. Groceries, gas, trips, etc. If this bill in enacted, I will no longer sell on EBAY and I'm sure there will many following in my footsteps. What's next? Sales tax for garage sales? Just trying to keep my head above water and now they want to push us back down into it. I don't get it.

Until last 1year sales tax burden for my home state alone was a burden. So I began looking for a way to lessen my businesses administrative burdens. I couldn't even imagine calculating, collecting and remitting sales tax for over 10,000 different tax jurisdictions in 45 states (five do not maintain sale tax). Instead of throwing in the towel and ending my Internet sales I searched the Internet for a solution. I am still amazed at what I found.

Today, thank to technology available free on the Internet, my online storefront is enables to calculate, collect and remit sales tax for any jurisdiction in the United States. Now I no longer have to pay my bookkeeper and accountant to handle the remedial processes associated with sales tax. It is actually easier now to process sales tax for the 24 streamlines states which have simplified their procedures, as outlined in the Marketplace Fairness Act, plus my home state and others where Nexus exists than it was for just my home state. It is actually easier than processing weights, destinations, dimensions, insurance and rates associated with shipping.

Even better my customers no longer fear fees and penalties for tax evasion should they be audited. Many consumers are unaware that use tax is due to be remitted on their individual state tax returns on all out of state purchases when the retailer fails to collect.

I believe you may actually be surprised as I was that processing sales tax is now easier than handling shipping.

Government should NOT pass this law. Why mess with something that's working so well? States need to find places to cut spending….state union member restrictions ring a bell? Leave the taxpayer alone…we have enough money being "confiscated" by other government taxes!!

The problem is we are now actually paying higher taxes enacted over the past decade to make up for declining sales and use tax dollars going uncollected. Choosing to pay sales tax at the time of transaction when we have money to spend is preferable over more demanding mandatory property taxes. The facts are really simple A + B = C. A & B are tax schemes maintained to equal C representing the demands we place on society. It's our Governments job to find ways to make sure A + B = C. If A should decline in value Government is therefore forced to increase B in an effort to maintain the value of C. If we choose to support less funding for education, police, fire, infrastructure and medical care then perhaps consideration can be given to lowering tax rates.

This is just another addition of Big Government sticking it's hands out for a piece of the action. The Internet was a place where we could get a little relief from the constant taxing of the States and the Feds. Now, even that is going to be tapped. If our forefathers ever saw the amount of taxes that we have to pay out now, they would probably say, "What are you all waiting for?".

It's no wonder people are staying on welfare and other assistance, they are just doing what the government teaches them!

Sales and use tax has been and is still due to paid by all consumers on taxable transactions made on the Internet and locally. Brick and mortar retailers have always been required to collect sales tax due on all purchases providing necessary funding for the schools, fire, police, infrastructure, medical assistance and many other services we all continually support through ballot initiatives. Now, Internet transactions are soaring while evaded sales tax revenues are declining at a correlating rate.

"But overriding the Quill decision would only give states an incentive to increase taxes instead of cutting the size, scope, and cost of government." – And there it is in a nutshell. Whether it is a town, a state or the country, far too many of our politicians can only think of more and more spending on some new program. This coincides with the growth in government dependence of our fellow citizens instead of depending upon oneself, one's family and community. Let's pass the buck, quite literally, to some government entity who will take care of us…as long as it is from 9 to 5 with coffee and lunch breaks included.

We don't need a moderate downsizing of government – we need a drastic downsizing at virtually all levels.

As one small Maryland business selling non-toxic fire retardants and shipping around the country, there is NO WAY I could keep track of and forward sales tax to 49 other states! Beyond that, ANYONE who buys on line, pays a heft shipping charge [per UPS] so their net cost is often MORE than a local who pays sales tax only!

In Texas, sales tax rates vary by county and city. If other states are anything like Texas, complying with this proposed law would become virtually impossible. Sellers would have to keep track of tens or even hundreds of thousands of rates. The cost would be phenomenal and would require a whole team of accountants just to manage it. Product prices would have to be raised to cover the cost and business would disappear. Most sellers, perhaps all, would be so adversely effected that they would have little choice but to quit selling across state lines. This is just a bad idea!

My business easily calculates, collects and remits sales tax due eliminating my customer's fear of being audited for sales tax evasion. The best part is utilizing modern technology my business now saves money processing sales tax for 26 states versus what I used to pay handling the requirements of my home states.

Internet sales tax has everything to do with Walmart and little to do with those poor little local retailers that Walmart and their ilk ran out of business years ago. If you look at electronic items on ebay you find the lowest prices are almost always sellers from China. How does congress plan on collecting sales tax from Chinese companies, or Canadian or Mexican. This will just give China even more advantage than the subsidized freight advantage they now have.

You are wrong on this. Consumers are already personally liable for the sales tax on Internet purchases. Internet retailers are simply not collecting the sales tax, as brick and mortar retailers are obligated to do. While states undoubtedly are after the tax revenue, this is also an issue of equity for the brick and mortar retailers who are disadvantaged unfairly by competition with Internet sites to the tune of the sales tax (4-10%) not collected and then almost never paid, as legally required by statute.

I own a small B&M retail store and sell on the internet. Any B&M can and none of us are disadvantaged by not having to collect and remit sales taxes on out of state orders. It's a relief to not have to mess with paperwork for 45 states (not to mention that cities and counties may also have additional sales taxes).

States should be enforcing their use taxes on their own citizens, not chasing businesses outside their legal jurisdiction. Oh wait, that is a sure fire way to lose re-election.

The way big government works: tax & spend (or often spend first then cry out for more taxes to cover the revenue gap). Big government is always looking out for new sources of tax money. Our out-of-control big government will not rest until it also starts taxing the internet. It's as simple as that! Of course, that won't solve the problem. The problem will continue to grow. But the crooked politicians will look like they are trying to balance the budget. The problem won't go away & only a financial collapse will force the politicians to, once again, spend less.

States have actually stated their support for the Marketplace Fairness Act in favor of ridding taxes such as death taxes and grocery taxes. The problem exists only if we continue to advocate for existing legacy bureaucracies.

I can not agree with you on this. At some point, Internet venders need to pay the same taxes as the brick and mortar stores. As it stands now they enjoy and unfair advantage. I am for letting the free market decide which is the more efficient supplier of goods without government incentives.

If you knew how complex the sales tax system is in each state, you might view this differently. In Texas, alone, there are hundreds of state, county and local tax rates, with transportation and other issues thrown in. To comply with such a law, the internet seller would have to track the rates for each of the localities their customers live in. It would be much too costly in terms of accounting services and drive most sellers out of business.

As an owner of a small brick and mortar store, the inequity of the brick and mortar store and the "invisible" internet seller must be fixed. If it can be fixed by nobody paying sales taxes, fine. But until that time, why should the internet seller have an advantage? The internet retailer argues that freight is an equalizer. Not in my world. I have to pay for building maintenance, employees to demo products and answer questions, an accounting staff to process payroll checks, etc… Customers come to my store to decide what to buy and then buy it cheaper online (from someone who doesn't have my overhead and doesn't pay sales tax). I am sure that PayPal can figure out how to get the proper sales tax to the proper authorities. And BTW, I am all for municipalities, counties and states reducing spending, but that is a separate issue.

That's silly, Steve if I live in saudia arabia, and want a product shipped to me, would you kindly pay the correct taxes to my municipaility, water board, school district, etc, oh and make sure the package has certain products that are eligible and not eligible,

Sound ridiculous, that's right, folks pay property taxes to the state, city, etc they live and vote in, your argument about unfairness is based on what retailers are telling you, retailers pay taxes because they receive and use services in their district, a merchant in Maine should not pay taxes to a california or texas municpial utility or school district, if the resident is required to pay a use tax, responsibility is .

Nicely done, however I would contend that states would not actually increase revenue, for as a general rule anytime rates are increased (which is essentially what is happening here), business activity decreases. The full folly of this is that what the states are asking to do is tax money that is leaving their state. In other words they will compound this loss of funds by taking even more money out of the pockets of the citizens and businesses that could otherwise be used to drive their local economies.

A far better solution is to create an environment to promote business development that will bring in more money than is being sent out. Any state that can create a net gain in this economic equation will find a growing, thriving economy, and little need to raise rates or creatively discover new ways to tax.

I have an internet business, both national and international in scope. 98% of our revenue comes from outside of our state, which means that 98% of the dollars we spend locally on wages, overhead, supplies, and utilities are new funds to the economy–a far better stimulus and tax revenue enhancer than any tax hike could ever be.

This effort is being couched in the liberal/progressive language of "fairness", which alone should give pause to anyone considering this. Big retailers, both big box brick and mortar and internet, are pushing this not to promote fairness, but to squash competition. Complying with this will be a nightmare for small businesses like mine, and be a serious deterrent to new startups.

Make no mistake, this is an unholy alliance of big-government bureaucrats and politicians who mistakenly believe it will add tax revenue, and large retailers looking to kill competition–and nothing more.

It is difficult to imagine how we arrived at our present situation. We are staggering under the weight of the cumulative effect of taxes. Federal, State, local … no government has ever seen a tax it didn’t like —the purpose of which is to plague us with bureaucracies we neither need, nor want.

I do not object paying a tax in order to use a toll road. In this instance, I have a choice whether to use the toll road, or take a non-taxed longer route. If there is a tax on goods purchased on the internet, I can decide whether to pay that tax, or earmark that tax to a local vendor —ostensibly benefitting the locale where I live. Americans like having choices.

Why are Americans not screaming bloody murder about paying as much as 62% of the cost of gasoline to federal, state, and local taxes? This means that $31 of a $50 gasoline sale goes to taxes! Are we insane? Meanwhile, Obama’s grand idea is to force oil companies to pay more taxes, which they will pass along to consumers. Honestly, it’s enough to make you wonder if we are living in purgatory. It is time for Americans to wise up. Our governments have become intolerable.

The current situation is a direct result of States' residents evading their sales and use taxes legally due. States have been left with no alternative except to raise existing tax schemes in the form of property taxes and other more demanding fees and taxes to make up for the their residents' tax evasive habits.

So how can a state like Michigan ask on their annual state tax return for the amount spent buying from out-of-state retailers who did not charge Michigan sales tax, so Michigan can then collect their state tax on those purchases? Based on this article, it sounds like they can't.

It sounds like you are advertising a product, allowing the federal government to give states the authority to tax folks who don't live in the state, listen if you sell me that boat right, and I live in CT and you in another state, and I have to pay use tax, fair enough right, but no, you the seller have to pay tax to my state, oh and make sure its correct,

It's like requiring a texas homeowner to pay your new york property taxes, only its personal property tax.

This would be an unconscionable burden on businesses who would have to track literally hundreds of sales tax rates across the country. Every one of the 67 counties in Florida charges a different rate, for example, and some of them change throughout the year. In addition, some items are taxable in some states and exempt in others.

Passage of this bill would be a nightmare for business and consumers alike.

There's more than one side to this story. I have a friend in the camera business. He is plagued by parasites masquerading as customers who want to examine his high-end wares wares, ask all kinds of questions, and the leave to ordered it online. My friend is able to meet the online prices, but there's no way he can eat the 7% sales tax too.

There needs to be a way to level the playing field. Giving online retailers a 5%-8% advantage over brick & mortar operations amounts to the government picking winners & losers. Is that something Heritage wants to sign on to?

Most people don't do that. One reason is that the shipping costs end up more than the sales tax. Also for a lot of items you want some product support that on line shopping does not give you. Then also if you have to return something you have to pay shipping again. It is much easier to return something damaged in person to the local store. There is no way to fairly tax out of state businesses because they would need to hire special employees to keep track and collect all the different taxes across the country, city, county, state as well as the federal taxes they are already paying.

@ 02beMe — This is the information age. An index of zip code to taxing authority authority would be a piece of cake. No extra employees needed. The retailer's computer could electronically transfer the quarterly remittence to the 50 states with county by county advice easy as pie. Online/locals like Wal-MaIrt & Apple are doing it right now. I don't necessarily think this bill is a great idea. i just think SOMETHING must be done so the government doesn't interfere in the market as it does now

Interstate sales and business have existed since before the founding of our country. At the turn of the last century, Sears was serving the quickly spreading population by providing products to folks in rural areas they could not otherwise get. Interstate sales are not new, and the interstate businesses–whether internet, mail order, or whatever–have been doing this for years.

The only reason this is coming up now is because our governments' collective spending is out of control and they are trying to create new victims to tax. With shipping and other issues, the 5-8% is little advantage. Most folks prefer to look at it, touch it, and take it home right away.

I compete directly with a product line easily found in any big box store far cheaper than I could ever offer. But my business is flourishing not because of a measly 5-8% savings they may have (disregarding the shipping I'll charge), but because we provide a better quality product, experience, and service level than they'll ever get in a big box store.

Competition is a good thing. If a local merchant is struggling against a competitor, regardless of the reason, they need to figure out how to improve their mousetrap.

They can, it is called a use tax, which most states have. And if everybody followed the use tax law, the playing field would be level. But everybody doesn't, or they cheat "just a little" and under report. The states might get aggressive enforcing it, but that is hard to do.

Jack, your are wrong and mislead by retailers, retailers pay sales tax because they have a physical presence in that state, Jack if you pay property taxes , who do you pay it to, your local city/state right?

If you sell me a boat and ship it to me, would you want to be in the position of paying my state the tax,

The issue is clear, retailers pay sales tax because they receive or are entitled to services or share the services in that state such as transportation and infrastructure, online merchants who are not located in the state receive no services or voting rights, so its not the same.

The bill will give retailers who have large pockets the advantage, because they have a physical presence in the state and take advantage of that location and pay tax for services and give out of state merchants a disadvantage, its as absurd as a texan homeowner paying new york school taxes, only its personal property, consumers are already required to pay a use tax.

This year as I was preparing my 2011 Federal and Nebraska State income taxes, I was surprised to learn that Turbo Tax 2011 included a notification that the State of Nebraska now required residents who made online and/or purchases out-of-state to report the amount of such purchases. So, I take it that if I go on vacation and purchase a product out of state i would be required to report the purchase amount and pay Nebraska sales tax rates including local taxes on my State Income Tax. For 2012 I now need to evaluate whether it is wiil be economical to shop online or not. I can see where this can lead a messy situtation with new forms for credit companies reporting out of state pruchases. Also, another interesting challenge to Article I Section 8 Clause 3 on regulating commerce amoung the several states.

Bloated budgets? Is there so much as a word of truth in this balderdash? You mean after all the cuts to police and fire, education, social services for the destitute and desperate? I understand you don't want taxes raised. No doubt you'd love the pure capitalism of the Gilded Age, where it was everyone for himself and to hell with the rest. What you dismiss so blithely is the truth: Mom and pop stores all over the country are losing sales to Amazon, et. al.,, esp. on larger-ticket items, because of this clear disadvantage of having to charge sales tax. By law, the buyer is supposed to remit the amount as a use tax, though few comply and enforcement is all but nonexistent. Your framing it as more bloated government is typically one-sided. And when are you going to come forward and remind our venal GOP that Obamacare was born at the Heritage Foundation? Hm?

This is just another addition of Big Government sticking it's hands out for a piece of the action. The Internet was a place where we could get a little relief from the constant taxing of the States and the Feds. Now, even that is going to be tapped. If our forefathers ever saw the amount of taxes that we have to pay out now, they would probably say, "What are you all waiting for?".

Great comment. As for the statement, "What are you all waiting for", why do you think the government wants to outlaw all sales of guns and therefore totally ignoring the Constitutional Amendment which allows everyone the 'Right to Bear Arms'.

My company has been selling on the internet since 1997. We sell safety products to customers sized as mom and pops, small and major industrial and construction companies and government agencies from municipals to military and major U.S. and State Government agencies. The internet allowed us to compete across many different geographical and business sectors and has allowed us to survive the past 29 years. We were bricks and mortar only for the first 14 years and would not be here today if we had not opened our horizons to on line sales 15 years ago. We have nexus for taxes in only one state and are required to calculate taxes down to the county and school district level on reports. This takes an immense amount of time. If we had to deal with taxes across the country in every state we sell, it would be impossible for us to remain in business. The manpower required for calculating all the myriad of taxes and filing all the reports would require more more people than I could imagine.

When local businesses complain about internet sales, they all forget about the leveling factor of shipping costs to get the product to the end user. In the vast majority of cases, this more than offsets the cost of the sales tax. Don't make small businesses across the country pay for the out of control and many cases self serving spending of the state and local governments. Most of us are struggling to survive and this would put many of us out of business. This will only reduce the market choices of purchasers since only the major sellers would be able to employ the vast number of people to calculate and file the taxes to all the taxing entities.

The shipping is irrelavant, because this is not a fairness argument, retailers pay taxes because they have a business in that state, think about this, as a homeowner you pay sales tax for transit and infrastructure
to the entity you reside in, so services can be paid for, now how would you feel i you have to pay an out of state homeowner's taxes?

For instance a merchant in maine, having to pay texas school property tax, municipal improvement tax,etc, then walmart has a physical warehouse in texas so folks can return items, etc

Obviously, taxation without representation is what the retailers are misleading folks about.

Help me here, please. I `like' the sound of defeating no only this tax possibility, but any new taxes proposed by Congress, etc. My tax question is this: I travel the country & order various items on the internet from companies not in the state I'm in. I live in NH which is `sales tax' free. 2 yrs ago, whenever I purchased something on the Internet and had it sent to another state other than NH, I paid the price of the item & no sales tax because the `billing address' on my Credit Card was NH. However; since that time, I've been required to pay the sales tax for whatever state the item purchased was `sent to.' I objected to this, but was told by the selling company/Credit Card co. that the "rules had changed" & now I have to pay the sales tax based on the `delivery address!!' I figured I was already paying (in most cases) the shipping and handling, which to me substituted for the sales tax, now I'm being hit for an illegal sales tax for I had not heard of any new legislation passed by Congress requiring me to pay these sales taxes. Could you, or someone else shed some light on this for me? TY CAdvoc

Instead of, at every turn, talking about taxes and more government revenue, shouldn't we be talking about spending cuts and downsizing the government? I mean isn't it ime for the Obama administration to go on a plan like weight watchers to fend off the urges to spend like there is no tomorrow. I think that at some point in time there has to be another Boston Tea Party and I hope it happens in November.

I don't often disagree with Heritage, but on this issue you are dead wrong. The current situation is grossly unfair to businesses that have bricks and mortar stores that serve as free showrooms for the online retailers.

The online retailers already have an advantage cost-wise since they don't have to pay rent.

It is grossly unfair to compound the problem by letting the online folks evade the sales taxes in the state where their customer lives.

Tom — the "warehouse" is a modern day slave plantation. The workers in these 'warehouses' work as "contractors" rather than employees, so that the operators can evade state employment laws. The wages are terrible, and benefits non-existant. It's a disgrace. Very sad for our nation. Try this:http://motherjones.com/politics/2012/02/mac-mccle…

Some protection is needed for the local business that displays an item and answers your questions about it , only to have you walk out and order it on the internet now that you know which product you want.

States and cities are losing revenue because of people buying on the internet. When you live in a city or state you should support that state or city. They supply you with lights, water, protection and other benefits, why shouldn't you help pay for them.

For Police and fire, this is covered under TAXES, called local and Real-estate, Utilities are paid to the companies directly and they have taxes added in, sales and use taxes and are NO WAY affected by internet or catalog sales. About 1.5cent of sales tax on a dollar goes to localities, the rest goes to the state and if you order from a company that has a brick and mortar or warehouse business in the state a tax is applied, otherwise you are suppose to add the sales tax on your state Tax when you file. I like to have orders from WAL-MART and Penney's sent to the store so I don't pay shipping, otherwise I shop mostly in store. I do order something I might not be able to find, but this is rare.

If I had a brick and mortar business in one state and found out I had to file 49 more state sales tax returns I would either want to be compensated by the non-resident states or I would move my distribution out of the country.

Remember that anytime the government jumps into an industry (or takes it over) it eventually destroys the growth of it. thru regulation This too will happen when it does this to the internet. If the government actually allowed the market to decide we would all be better off, and a lot richer for it.

I hope this bill never sees the light of day. Not all of us live next to department/specialty stores. For me, and my fellow residents, to get to one I have to make plane reservations and fly over 500 miles or drive 800 miles to get to the same destination after taking a 70 mile ferry trip.
Maybe the states that are supporting this need to take a look at their budgets and spending habits. Instead of killing sales in states that have catalog stores thus possibly causing lay offs.

The overriding premise is that all funds are property of the Federal Government and they allow us to keep what they feel is our "fair share." This explains the current administrations mindset when dealing with taxation and the distribution of funds. If we are to survive there needs to be a fundamental change in government promoting self-reliance. I listened to a radio commercial in New Orleans last weekend touting the virtues of a particular insurance company that integrates Medicaid payment for children into their health care plan. The women praising the company clearly is young. As I see it – its over and the fat lady is singing………

I live in California who will be trying to tax Internet stores this coming Fall. I don't see that as reasonable. It just makes it easier for states like California to spead their commerce – destroying taxes from the street to the Internet. Perhaps if there was some competition from the Internet, the Sacramento government would think twice about makeing sales taxes so high.

I own a business in Texas and purchase items over the internet as well as purchase items from out of state suppliers. During my audit this year by the state of Texas I was fined for back state sales tax for purchases out of state that I had not sent payment to the state each quarter. This was to the tune of $30K. The state expects both businesses and individuals to pay the tax themselves since they can not force individuals/businesses out of state to send them the money.

At the end of the day, the internet has a tax loop hole that local businesses do not have. You can buy software that you put in the zip code that the item is being delivered to and calculate the tax. It is just another item to take care of. I do not support loop holes for any business to survive. They should compete in the pit like the rest of the heard and the best competitor in the market place will win. The weak die and the strong survive.

The biggest problem with this is not having to figure out 49 others state's tax rates and the insane amount of time that would require, along with the red tape involved with paperwork, tax filings, etc. The even larger issue would be that the taxes would actually have to be split out by county, not state. And within a given state each county's tax rates are different. This, alone, would drive most small businesses out of business and the larger companies would have to increase rates merely to cover the cost of hiring people to keep track of this.

This will effectively kill online commerce for all but the largest players, as no small business will be able to afford filing state tax returns in all the states they do business in. An entire cottage industry, that employs untold hundreds of thousands of people, will be legislated out of business, overnight. Many people who are underemployed, and run small Internet businesses on the side, will no longer have that extra income.

The Internet is one of the last places an ever intrusive, ever regulatory government has not yet destroyed for the average Joe. Armed with some basic skills, the average guy can setup an online store and sell his or her ideas, or crafts, or wares. This will eliminate this opportunity, for everyone. All the little companies that build web sites for these entrepreneurs, including my own, will see reduced revenue.

Thanks, Mike, for bringing this issue to light. Now please, everyone, put the pressure on Congress.

Anyone living in California already realizes that each individual is required to pay taxes on anything bought from an out-of-state company/individual for which no taxes were charged. If California can tax California residents on purchases made like that, then the rest of the states could easily follow suit. There is no need for a federal law requiring out-of-state businesses from collecting and sending the collected taxes to the state of residence of the purchaser. Leave well-enough alone.

Obama and the "progressives" are proposing the "Buffet Tax". It raises $4.7 billion PER YEAR. Our government spends $11 billion PER DAY. Deficit spending is about $3.5 billion PER DAY. Deficit problem solved, I guess, at least for a day and a little more.

As a fellow conservative I am confused about what the Heritage Foundation is advocating for? Even though the article does not specifically state that tax is not due on out of state Internet sales, it does prompt the reader to believe that Internet sales are tax exempt. My State tax return, as most States' returns do, has a line for use tax remittance indicating that uncollected sales/use tax on Internet transactions are the obligation of residents to honorably remit. If I choose not to remit the use tax due then I would be labeled a tax evader and be subject to penalties and possible incarceration. In my opinion, as a small business owner, technology can easily calculate and automate sales tax for any jurisdiction in any state. Instead, it seems, everyone is advocating for the illegal act of tax evasion. I would rather support legislation and progressively employ modern technology eliminating the pesky use tax burden and removing sales tax collection and processing burdens from states and businesses.

Slaes and use tax is currently required on all out of state transactions which merchant's fail to collect leaving the burden to consumers to honorably remit on their individual returns. The problem, most people don't realize they are supposed to. I actually favor Federal Legislation granting States' rights to collect tax already legally due.

Fine. Then would Heritage propose that the governments convert the sales tax to a european style national VAT tax in order to level the playing field? Or just let all of the brick and mortar based businesses go out of business (Borders, anyone?). No one likes to pay taxes, yet everyone seems to like the government services they get "for free". Can't have it both ways.

I hate how people who support the Amazon Tax call it "leveling the playing field". How is working within the laws to your advantage unlevel? I mean, when I go to Walmart, I observe about 10 things that would make me never want to come back. And when people argue that you should support your local economy, the nearest bookstore, Target, etc is out of my municipal and believe me, we aren't seeing any of that money flood in to our area just the rich areas these places are located in.

This amazon tax is nonsense and is being supported by people who are standing on the bow of a sinking ship rather than jump ship into the nearest lifeboat.

Factchecker, I think you are confusing local property taxes with state sales taxes. Local property taxes are taken from local property owners, who presumably benefit from things like public schools, fire department, street repairs, dog catcher, etc. State sales taxes are applied to everyone within a given state who purchases taxable goods and services, and that money is used by the state to do I don't really know what. But the sales tax is imposed on the purchaser, not a property owner. Does that help?

Then I think you missed a key point. The payment of sales taxes for internet purchases already are required by state laws. The problem is enforcement. Unlike your local gas station or grocery store, Amazon refuses to collect sales taxes. As a consequence, they go unpaid, and Amazon enjoys a very significant pricing advantage (6.35% in Connecticut, for example) versus all of it's bricks and mortar competitors who do collect the sales taxes. What's confusing?

Also, what is with this new mantra that if you don't like something, tax it to death? I hear environmentalists where i live always talking about how we need to tax people to the point that they will use public transportation and so on. Whatever happened to inventing and innovating rather than taxing people to the point of going back to an inefficient model?

Everyone now knows technology available freely on the Internet can easily calculate, collect and remit sales tax in any jurisdiction for any state eliminating legacy burdens for any business. In my case it is now simpler to remit for multiple states than it was my home state. Shipping products is actually more of a burden than processing sales tax. No longer do I pay frustrating my accountant and bookkeeper with burdensome legacy tax procedures. Twenty four states now utilize one simplified e-file remittance procedure making filing for any business a snap. If any audit should arise the audit defense is handled by the Certified Service Provider.

The large e-Commerce retailers have used small businesses as a scapegoat hiding behind the “too burdensome for small businesses” argument too long. What is really best for small businesses is for large e-Commerce retailers to support S. 1832 the Marketplace Fairness Act and stop wasting millions of dollars lobbying for a false cause.

It is time for progressive action to start our fragile economy down a road of recovery. I strongly support and urge Congress to immediately pass S.1832 the Marketplace Fairness Act.

Every time a I see a story like this it bothers me because it is only part of the story…thru omission. States that have a sales tax have a complimentary use tax. That means that if I buy something on-line that is taxable in my state, then I am to self-assess the use tax and remit it to the state I live in. This is because I am using or consuming the items in my state. Therefore, buying through the Internet does not alleviate the tax burden for the purchase, just changes who is responsible for assessing and remitting the tax, as use tax rather than sales tax.

I read this article, not only in shock, but after further review of our current ruling party I can reach no other conclusion but our President and his cronies are 'out of control'. To tax anything and everything is just nothing but outrageous. Study after study has shown taxes to be oppressive to the economy. But, does this deter these power hungry politicians who believe they know how we need to lead our lives better than we do? No, it doesn't. Empirically, every Liberal Democrat which has been elected, outside of JFK who delivered a tax cut to the wealthy, has raised taxes in an attempt to increase their control over, not only the economy, but the American people's freedom. When will the American people realize this and look inside instead of to a corrupt government to succeed? I hope during the next Federal election.

I’m just one vote, but if a Republican Congress passes this, I am D.O.N.E. with voting. The GOP sits there year after year after year parading your “smaller government” mantra, but in the end you always do the opposite. Why don’t you just close shop, join the democrats, and let’s have one political party? Operationally you are the same. What a worthless bunch of slugs.

Republicans are far more dangerous than democrats people. With the dems, you at least know where they stand. They are consistent in wanting to tax every bead of sweat that falls from your brow and sending a drone up your azz if you don’t comply. The GOP? They are snakes—like a cruel warden, telling you that your sentence has been commuted. They open the gate and let you walk towards freedom; but before you cross the boundary, they hit you with a taser and say “Oops, we made a mistake.” Then they shut the gate on you.

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